In Florida, employee handbooks, procedure manuals, and other statements of an employer’s policy are generally non-binding and do not give rise to enforceable contract rights. But suppose an employer induces an employee to continue working by offering a long term incentive plan? That was the issue addressed in a recent decision by Florida’s Fourth District Court of Appeal, Turton v. Singer Asset Finance Co., LLC (Fla. 4th DCA, September 4, 2013).
Singer Asset Finance Company was in the business of purchasing, servicing and securitizing assets, including state lottery awards and structured settlement payments.In 2000 or 2001, Singer decided to cease all business except to become a “run down” entity, functioning solely for the collection of its structured settlement portfolio. To incentivize employees to stay with the company during the “run down”, Singer offered the “2001 Singer Long Term Compensation Plan.” One of the express purposes of the Plan was to “[c]reate enough incentives so that employees will not resign their positions.” The Plan guaranteed employees at least twenty-five shares per year and contained a formula for how employees would receive shares in the Plan each year. The Plan also contained formulas for determining the value of shares, how much each shareholder would receive for the shares, and how payments would be made to shareholders.
Margaret Turton worked for Singer from 1997 through December 2009. Upon her resignation, she demanded payment of the value of her vested shares in the Plan. Singer refused payment, and Turton sued for breach of contract. Turton argued that she relied on the offer of long term compensation – that she would not have continued working for Singer in her “dead end job” beyond 2001 if not for the offer of compensation under the Plan. Singer argued that the Plan was neither a contract nor an offer and that any compensation from the Plan was discretionary. The trial court agreed with Singer and granted the company’s motion for summary judgment, noting that that there was no explicit language in the Plan stating that it was a binding contract.
On appeal, the Fourth DCA reversed. The court noted that the Plan was not only designed to compensate employees for hard work, but also to compensate employees for not quitting a dying business. Thus, there were questions that a jury would have to resolve: Whether the transmission of the Plan to Turton constituted a continuing offer to avoid Turton’s resignation, and whether Turton’s continued employment was a continuing acceptance of the offer.
It seems likely that a jury of Turton’s peers will answer these questions in her favor.
For employers, the Turton case should serve as a reminder of the importance of careful drafting. If you want an offer of compensation or benefits to an employee to be discretionary and non-binding, state that clearly in the document. Absent such a disclaimer, the employee’s acceptance of your offer is likely to create a binding contract. The defense that “we didn’t mean what we promised” is not very appealing, especially when employees rely on that promise.